Long-Term Care Industry Introduction Efficient delivery of services to a nation’s population necessitates a long-term care industry.

Long-Term Care Industry Introduction Efficient delivery of services to a nation’s population necessitates a long-term care industry.
Long-Term Care Industry
Efficient delivery of services to a nation’s population necessitates a long-term care (LTC)
industry. The LTC industry mainly consists of private providers—organizations that deliver
services and can independently bill for those services. In addition, some tax-supported
government agencies deliver social services. This chapter elaborates on these providers as a
segment of the LTC industry. Other segments of the industry include LTC professionals employed
by the industry; without them the industry cannot function. They can be classified as
administrative professionals, clinicians, paraprofessional caregivers, ancillary personnel, and
social support professionals. In addition, key partners play vital supportive roles. These partners
include the insurance industry, managed care organizations, case management agencies, longterm care pharmacies, and developers of medical technology.
The Provider Sector
The term provider refers to an entity that gets reimbursed for services delivered. Various private
organizations and facilities, both for profit and nonprofit, are part of the LTC industry. Both LTC
institutions and community-based service providers are essential to serve a variety of needs.
The LTC industry is predominantly funded by the government, and certain sectors of the
industry are more stringently regulated than others.
Community-Based Service Providers
Four main types of providers constitute the community-based sector of the LTC industry: (1)
home health providers, (2) homemaker and personal care service providers, (3) adult day care
providers, and (4) hospice service providers.
Home Health Providers
Home health care is consistent with the philosophy of maintaining people in the least restrictive
environment possible. Without the availability of skilled nursing care and rehabilitation services
in patients’ own homes, the patients would have to be in hospitals or nursing homes to receive
the same services at a much higher expense. The organizational setup commonly requires a
community- or hospital-based home health agency that sends licensed professionals and
paraprofessionals—aides and attendants—to patients’ homes to deliver services approved by a
The 1988 class-action lawsuit of Duggan v. Bowen was instrumental in expanding home health
benefits under Medicare. The new rules that took effect in 1989 removed the requirement of a
3-day hospital stay before home health visits would be covered under Medicare and abolished
the maximum limit of 100 visits, as the former criterion had specified. Between 1990 and 1996
alone, the number of home health care providers grew from 5,800 to 9,900 (Liu et al., 1999). Medicare criteria focus on clinically oriented care, not long-term support and assistance, which
is referred to as custodial care. Under Medicare, skilled nursing care is the most common
service received by home health patients.
According to the most recent 2007 Home and Hospice Care Survey, there were 14,500 home
health and hospice care agencies in the United States. Approximately 75% of these agencies
provided only home health care; 10% were mixed agencies providing both home health and
hospice services (Park-Lee & Decker, 2010). The majority of these agencies are private for profit.
Medicare is the single largest payer for home health services; 45% of all home care
expenditures in 2010 were attributed to Medicare (National Center for Health Statistics, 2012).
For Medicaid beneficiaries, states pay for the same services that Medicare does. Private LTC
insurance also includes skilled home care benefits.
In addition to Medicare-certified agencies, there are numerous noncertified home care
agencies, home care aide organizations, and hospices. Often, such agencies do not provide the
breadth of services that Medicare requires. For example, home health aide organizations do not
provide skilled nursing care.
Homemaker and Personal Care Service Providers
Homemaker and personal services include assistance with personal hygiene (such as bathing),
light housework, laundry, meal preparation, transportation, and grocery shopping. Various
private agencies offer services for in-home assistance. Homemaker and personal care services,
however, are not covered under the Medicare program. To varying degrees, states pay for
homemaker and personal care for Medicaid beneficiaries, in which case services are
coordinated through Area Agencies on Aging.1 Personal funds are used to pay for these services
by those who do not qualify for Medicaid.
Adult Day Care Providers
Adult day care (ADC) is a community-based extramural service. It enables people to live with
their families and fulfills family caregivers’ need for respite so they can go to work during the
day. These centers may be located in senior centers, nursing facilities, churches or synagogues,
or hospitals. Many centers also provide transportation from home to the center and back.
Today, most ADC services are highly focused on prevention and health maintenance, with the
objective of preventing or delaying institutionalization. Over time, ADC services have become
more clinical in nature (see Figure 3–1). As such, ADC services, in many instances, have become
alternatives to home health care and assisted living and as a transitional step before placement
in a nursing home.
Nationally, there are 4,800 ADC centers with a capacity to serve 276,500 clients daily.
Approximately, 55% of these centers are nonprofit. Medicare does not pay for ADC, but 75% of
the ADC centers are certified for Medicaid. In terms of demographics, 37% of the clients are under the age of 65 and 32% have Alzheimer’s disease or other dementias (Harris-Kojetin et al.,
2013). The national average cost of ADC was $70 per day in 2012 (MetLife, 2012).
Hospice Service Providers
Medicare added hospice benefits in 1983, 9 years after the first hospice opened in the United
States. For a patient to receive hospice benefits, a physician must certify that the patient is
terminally ill and that the patient’s life expectancy is 6 months or less (Centers for Medicare and
Medicaid Services [CMS], 2013a). Benefit payments by Medicare, however, are not limited to 6
months. The patient must also agree to waive the right to medical treatment for the terminal
Figure 3–1 Percentage of Adult Day Care Centers Providing Various Services, 2012
Data from Harris-Kojetin, L. et al. (2013). Long-term care services in the United States: 2013
overview. Hyattsville, MD: National Center for Health Statistics.
People most commonly served by hospice have cancer, heart disease, unspecified debility,
dementia, or lung disease. Cancer accounts for 37% of all diagnoses. The average length of
service in 2012 was 71.8 days. The majority of care was provided in private residences (42%)
and in various types of LTC facilities (25%). In addition, 27% of the patients received care in a
hospice inpatient facility and 6% received hospice services while in a hospital (National Hospice
and Palliative Care Organization [NHPCO], 2013).
The number of hospice programs nationwide has grown from 4,850 in 2008 to 5,560 in 2012.
Most of these are certified by Medicare. The majority of hospices (57%) are independent,
freestanding agencies. The remaining are part of a hospital, home health agency, or nursing
home. Hospices served an estimated 1.5 to 1.6 million patients in 2012. Medicare is the largest
source of payment (83.7% in 2012) for hospice care. Other sources include private insurance
and Medicaid (NHPCO, 2013).
Quasi-Institutional Providers
The institutional continuum of LTC includes a range of facilities that often do not have clear-cut
distinctions. Yet, these facilities can be classified into three broad categories: (1) independent
living facilities, which are not truly institutions because they do not generally deliver health
care; (2) custodial care providers that limit their services to social support and personal care;
and (3) assisted living facilities and nursing homes. Here, the first two categories are referred to
as quasi-institutions because clinically oriented services are either nonexistent or minimum in
these facilities.
Independent Living and Retirement Centers The three main independent living categories are (1) government-assisted housing, (2) privatepay housing, and (3) cohousing. These dwellings differ from other institutional settings in that
staff are generally not present 24 hours a day. A business manager generally maintains office
hours 5 days a week and may be available on-call for emergencies.
Government-Assisted Housing The U.S. Department of Housing and Urban Development
(HUD) administers three different housing programs:
1. Under the Public Housing program, HUD administers federal aid to local housing agencies
that manage the housing for low-income residents at rents they can afford. Anyone with low
income, including the elderly and disabled persons, can apply for the program.
2. The Section 8 program offers vouchers or certificates that allow people to choose any
housing in the private market that meets certain requirements and apply the voucher or
certificate toward rent. Section 8 program is also managed by local public housing agencies.
3. The Section 202 Supportive Housing for the Elderly program is specifically meant for lowincome people who are at least 62 years old at the time of initial occupancy.
HUD provides interest-free capital advances to private, nonprofit sponsors to finance the
development of supportive housing. HUD also provides rent subsidies for the projects to help
make them affordable. The capital advance does not have to be repaid for 40 years as long as
the project serves very low-income elderly persons. A similar program is Section 811 Supportive
Housing for Persons with Disabilities. Additional supportive services such as Meals On Wheels,
homemaker services, and transportation are arranged from community-based providers. Clinical
services are arranged with a home health agency.
Private-Pay Housing Many upscale retirement centers abound, in which one can expect to pay
a fairly substantial entrance fee plus a monthly rental or maintenance fee. These complexes
have various types of recreational facilities and social programs. The fees often include the
evening meal. Cleaning services, transportation, and other types of basic assistance may be
provided at an extra charge. Many of these facilities provide monthly blood pressure and vision
screenings, and many organize local outings for shopping and entertainment. Nursing or
rehabilitation services, when needed, can be arranged with a local home health agency.
Cohousing Cohousing—a type of collaborative housing in which residents actively participate
in the design and operation of their own neighborhoods (Cohousing Association of the United
States, 2013)—is a relatively new development in the United States. The main features of a
cohousing community include condos clustered around a central courtyard, a common house
where residents can socialize and share meals, and a system whereby the residents operate and
maintain the property themselves (Clark, 2013). The concept originated in Denmark and is
expanding into other European countries, Canada, and Australia (Cohousing, 2013). The United
States has approximately 125 cohousing communities (Clark, 2013). Custodial Care Providers
The facilities in this sector go by various names: adult foster care homes, board-and-care
homes, personal care homes, sheltered care homes, and domiciliary care homes. Custodial
services are rendered by paraprofessionals rather than licensed nurses or therapists. Each state
has established its own standards to license these facilities. Funding typically comes from
Medicaid, private insurance, and personal sources. Medicare does not pay for custodial care
alone. Depending on temporary needs, home health care can be called in to deliver skilled
nursing and rehabilitation services. Some states are trying to boost capacity of custodial care
providers. Under the Money Follows the Person program, states see a greater need for quasiinstitutional alternatives.
Adult foster care (AFC) homes (also called adult family homes or adult family care) are familyrun homes that provide room, board, supervision, and custodial care. The homes are modified
to accommodate people with disabilities and prevent unsupervised wandering because many
residents have some degree of dementia or psychiatric diagnosis. There is 24-hour supervision
in the homes. Typically, the caregiving family resides in part of the home. To maintain the family
environment, most states license fewer than 10 beds per family unit. However, many people
have made a business of AFC by buying several houses and hiring families to live in them and
care for the residents. A skeleton staff is employed to provide assistance with ADLs, to clean,
and to cook meals.
In some states, AFCs are declining in numbers. Low reimbursement rates are seen as one factor
in the declining number of persons willing to be AFC providers (Mollica et al., 2008).
Institutional Providers
Institutional providers are the most visible sector of the LTC industry. Institutional care generally
connotes some degree of confinement to an institution because of a relatively high level
dependency. Such institutions include assisted living facilities, nursing homes, and continuing
care retirement communities.
Assisted Living Facilities
Assisted living facilities are regarded as LTC institutions that provide services that range between
custodial care and skilled nursing care. Assisted living has been the fastest growing type of LTC
institution in the United States. In 2012, there were 15,447 assisted living facilities nationwide,
an increase of 9% over 5 years (Sanofi-Aventis, 2013). Assisted living facilities generally have a
skeleton staff of licensed nurses, mostly licensed practical (or vocational) nurses, who perform
admission assessments and deliver basic nursing care. Advanced nursing care and rehabilitation
therapies can be arranged through a home health agency. Assisted living facilities operate predominantly on a private-pay basis; 86% of the residents use
their own financial resources (Assisted Living Federation of America, 2013). In 2012, the average
monthly cost was $3,550, less than half of what it would cost for private accommodation in a
nursing home (MetLife, 2012). However, costs vary according to amenities and the services
required by a resident. Most facilities charge a basic monthly rate that covers rent, board, and
utilities. Additional fees are charged for nursing and personal care services. Many facilities also
charge a one-time entrance fee, which may be equal to 1 month’s basic rent.
In some states, assisted living care may be covered under the Medicaid program for the
recipients of Supplemental Security Income (SSI) or may be funded through Title XX Social
Services Block Grants or 1915(c) home- and community-based services waivers. Upscale
facilities, however, do not participate in public payment programs.
All states now regulate ALFs by requiring them to be licensed. In the absence of federal
standards, regulations vary from state to state. These regulations continue to evolve in response
to the rising acuity levels of residents. The typical assisted living resident is female, 87 years old,
mobile, but needing assistance with two to three ADLs (National Center for Assisted Living,
2013). A growing number of assisted living facilities are providing specialized care for the elderly
who have dementia and Alzheimer’s disease.
Nursing Homes
In the minds of many people, long-term care is synonymous with nursing homes—a common
misconception. The appellation “nursing home,” however, has no specific meaning. In health
care literature, the term “nursing home” is generally used for facilities that are licensed as
nursing homes and are often certified by the federal government. Licensing of nursing homes is
mandatory in every state. Certification enables a nursing home to participate in the Medicare
and Medicaid programs.
Skilled Nursing Facilities A skilled nursing facility provides a full range of clinical LTC services,
from skilled nursing care to rehabilitation to assistance with all ADLs. Examples of skilled nursing
care include monitoring of unstable conditions; clinical assessment of needs; and treatments
such as intravenous feeding, wound care, dressing changes, or clearing of air passages.
Examples of skilled rehabilitation include postsurgical orthopedic care after knee or hip
replacement, cardiopulmonary rehabilitation that is necessary after heart surgery or heart
catheterization, and improvement of physical strength and balance. A variety of disabilities—
including problems with ambulation, incontinence, and behavior—often coexist among a
relatively large number of patients in need of skilled care. Compared with other types of
facilities, nursing homes have a significant number of patients who are cognitively impaired
because of depression, delirium, or dementia. The social functioning of many of the patients is
also severely impaired.
A physician must authorize the need for skilled care. An attending physician must approve the
plan of treatment. Delivery of care is also periodically monitored by the attending physician who makes rounds and follows up on the course of various treatments being given. Rehabilitation
services are provided by registered therapists—physical therapists, occupational therapists, and
speech/language pathologists—who may be employed in house or contracted from a therapy
services provider. The majority of direct care with ADLs is delivered by paraprofessionals, but
under the supervision of licensed nurses and therapists.
To capture a larger share of the LTC market, some skilled nursing facilities operate a distinct
assisted living unit or wing, and a few have adult day care. An increasing number of nursing
homes (55% according to MetLife, 2012) operate distinct units or wings for Alzheimer’s and
dementia care.
The nursing home industry in the United States is dominated by private, for-profit nursing home
chains that operate a group of nursing homes under one corporate ownership. Approximately
17% of the nursing homes are operated by the 15 largest nursing home chains; the largest of
them, Genesis Health Care (Kennett Square, PA) operated 383 nursing homes with over 46,000
beds in 2012 (Sanofi-Aventis, 2013). A breakdown of U.S. nursing homes according to the type
of ownership appears in Figure 3–2.
Although the charges for services vary quite substantially among states, the national average for
a private room in 2012 was $248 per day (MetLife, 2012). Medicaid is the largest single source
of payment for nursing home services.
Subacute Care Facilities The patients needing subacute care may be recovering after
hospitalization but are still subject to complications while in recovery. They require more
nursing intervention than what is typically included in skilled nursing care. The patients may still
have an unstable condition that requires active monitoring and treatment, or they may require
technically complex nursing treatments such as wound care, intravenous therapy, blood
transfusion, dialysis, ventilator care, or AIDS care.
Figure 3–2 Breakdown of Nursing Homes by Type of Ownership, 2012
Data from Harris-Kojetin, L. et al. (2013). Long-term care services in the United States: 2013
overview. Hyattsville, MD: National Center for Health Statistics.
The three main institutional locations for subacute care—long-term care hospitals (LTCHs),
hospital transitional care units (TCUs), or freestanding nursing homes—vary in terms of
availability, cost, and quality. Unlike TCUs that are certified as skilled nursing facilities, LTCHs are
certified as acute care hospitals. Many LTCH patients with complex medical needs are admitted
directly from short-stay acute-care hospital intensive care units. Not surprisingly, LTCHs are the
most expensive of the three types of subacute settings. Skilled nursing facilities are often a more
cost-effective alternative, but they need to increase the ratio of licensed nurses to provide
adequate care to subacute patients. The number of hospital-based TCUs has steadily declined whereas the number of LTCHs has grown as hospitals have diverted their resources to capture
better reimbursement from Medicare.
Intermediate Care Facilities for Individuals with Intellectual Disabilities (ICFs/IID) Federal
regulations provide a separate certification category for LTC facilities classified as ICFs/IID since
1971 (formerly known as Intermediate Care Facilities for the Mentally Retarded—ICF/MRs),
when Section 1905(d) of the Social Security Act authorized Medicaid coverage for the care of
the intellectually/developmentally disabled (IDD) patients in ICF/MR facilities. Most of these
patients have other disabilities, in addition to intellectual disabilities (IDs). For example, many of
these patients are nonambulatory, have seizure disorders, behavior problems, mental illness,
visual or hearing impairments, or have a combination of these conditions. The primary purpose
of ICFs/IID is to furnish nursing and rehabilitative services that involve “active treatment.” Active
treatment entails aggressive and consistent specialized programs that include skill training to
help the patients function as independently as possible. Over 6,000 ICF/IID facilities serve over
100,000 individuals in all 50 states (CMS, 2013b).
Continuing Care Retirement Communities
Full-service continuing care retirement communities (CCRCs)—also called life-care communities
—integrate and coordinate the independent living and other institution-based components of
the LTC continuum. Different levels of services are generally housed in separate buildings, all
located on one campus. The range of services is based on the concept of aging in place, which
accommodates the changing needs of older adults while living in familiar surroundings. The
range of services includes housing, health care, social services, and health and wellness
programs. The residents’ independence is preserved, but assistance and nursing care are
available when needed. In 2009, over 1,800 CCRCs operated in the United States; most were
operated by nonprofit organizations (Cackley et al., 2010).
CCRCs, for the most part, require private financing, with the exception of services delivered in a
Medicare-certified skilled nursing facility (SNF). Three types of CCRC contracts are common in
the industry: (1) a life care or extended contract incorporates a complete package of services
that includes a commitment to provide unlimited future LTC services without an increase in the
monthly fee; (2) a modified contract provides for support services in independent living and
includes a limited number of days of care in assisted living and SNF without an increase in the
monthly fee; and (3) a fee-for-service contract that includes only support services in
independent living; higher level of services must be paid for out of pocket at the prevailing
rates. There is a wide variation in entrance and monthly fees based on amenities and the type
of contract. In the state of New York, for example, entrance fees begin at approximately
$115,000 for a single person independent living unit; monthly fees begin at approximately
$2,100 (New York Department of Health, 2013).
The CCRC living option is directed at middle- and upper-middle-income clientele. Communities
are operated by both for-profit and nonprofit organizations. Residents typically choose to enter
these communities when they are in their late 70s and are still relatively healthy. The Insurance Sector
The insurance sector includes numerous commercial insurance companies that sell LTC
insurance. Insurers offer individual and group LTC insurance. Employees of the federal
government can purchase LTC insurance at group rates through the Federal Long-Term Care
Insurance Program.
Individual insurance is purchased by people directly through insurance companies or insurance
brokers very much like they would purchase auto insurance or home insurance. Group
insurance is made available to individuals through their employers, unions, professional
organizations, or consumer organizations such as the AARP and the Association of Mature
American Citizens (AMAC). Generally, group premiums are lower than those for individually
purchased insurance because a large number of people band together to purchase insurance
through a group sponsor. Managed care organizations (MCOs) are also involved in LTC
Commercial Insurance
Commercial insurance companies are risk underwriters. They determine the level of premiums
necessary to cover potential claims in the future. They collect premiums and pay claims arising
from the utilization of LTC services when the covered beneficiaries use the services in
accordance with the ins…

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